WHY were gold and silver prices recently hammered?
derryb
Posts: 36,825 ✭✭✭✭✭
There has been a lot of discussion on "by whom" and "how" concerning the recent crash in PM spot prices. IMO the most important question is "why?"
Following the nationalization of private banking funds in Cyprus there was a mad rush worldwide to convert paper counterparty risk into safe physical holdings and precious metals were not left out of the action. As a result, worldwide metal depositories, and most importantly the COMEX, began experiencing a hemmoraging of physical metal.
GOLD DISAPPEARING FROM DEPOSITORIES EVERYWHERE
As I proposed in an earlier thread "by smashing the paper market, those who were long and stopped out will no longer be able to make a claim for physical delivery. Witnessing what happened to price, those still holding paper futures will have second thoughts on demanding physical delivery. They were basically told "this is a paper market, let's keep it that way, or else."
It will be interesting to see if this latest action does in fact slow the bleeding of physical metal or if further action will be necessary. It's still early in the second inning, but it appears demand for physical has definitely increased. If so, expect further steps to discourage physical ownership. The creativity of those developing it will show no reasonable limits. I suspect we are about to see more effort to reduce physical demand. I also suspect that all along price attacks were in reality a means to weaken physical ownership. Seems each time they shake the tree, they shake it a little harder. Their ultimate weapon of course is the chain saw - an attack on physical ownership itself, either in the form of ownership controls or increased tax consequences. I for one will be watching future COMEX inventory reports.
While this causes me to question short and intermediate price strength, it only hardens my long term outlook. I for one will continue to play the silver volatility, both up and down, with ETFs while adding to my physical holdings with the profits.
Following the nationalization of private banking funds in Cyprus there was a mad rush worldwide to convert paper counterparty risk into safe physical holdings and precious metals were not left out of the action. As a result, worldwide metal depositories, and most importantly the COMEX, began experiencing a hemmoraging of physical metal.
GOLD DISAPPEARING FROM DEPOSITORIES EVERYWHERE
As I proposed in an earlier thread "by smashing the paper market, those who were long and stopped out will no longer be able to make a claim for physical delivery. Witnessing what happened to price, those still holding paper futures will have second thoughts on demanding physical delivery. They were basically told "this is a paper market, let's keep it that way, or else."
It will be interesting to see if this latest action does in fact slow the bleeding of physical metal or if further action will be necessary. It's still early in the second inning, but it appears demand for physical has definitely increased. If so, expect further steps to discourage physical ownership. The creativity of those developing it will show no reasonable limits. I suspect we are about to see more effort to reduce physical demand. I also suspect that all along price attacks were in reality a means to weaken physical ownership. Seems each time they shake the tree, they shake it a little harder. Their ultimate weapon of course is the chain saw - an attack on physical ownership itself, either in the form of ownership controls or increased tax consequences. I for one will be watching future COMEX inventory reports.
While this causes me to question short and intermediate price strength, it only hardens my long term outlook. I for one will continue to play the silver volatility, both up and down, with ETFs while adding to my physical holdings with the profits.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
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Comments
are still buying.
The people that I know who are spooked by gold,
are still spooked.
I have attempted to explain the rationale behind a 10-20% PM diversification
to many peeps the last 10 years.... a couple of people got the bigger picture.
<< <i>Based on that input, the next few months should be interesting. Long term however, I still see gold going up.... seriously up. Cheers, RickO >>
My only long term concern is the chain saw. Growing world wide central bank life support protects the stacker from everything else.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
You would think that there would be a concentrated effort to solve that problem.
Us small time gold accumulators seem like nothing more than a nuisance when you look at the
big picture
I wonder if the policy wonks even get it. When one thinks about the political capital
that has been invested in non economic issues that last few years, it makes me nauseous.
<< <i>Us small time gold accumulators seem like nothing more than a nuisance when you look at the big picture >>
I suspect the massive transfer of metal from west to east has finally gotten someone's attention and we small fish are just casualties of the war. Unless of course we hold our metal tight.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
Here is how its done:
Asset Leased
To 'fix' the missing Gold, you had better start here by reeling in the Leases
Leased metal is not that big of a concern for COMEX, it maintains the right to settle in cash. I believe where it is all going is of more concern to them than how much of it is going. Once it goes east. . . it's gone.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
<< <i>I suspect we are about to see more effort to reduce physical demand. I also suspect that all along price attacks were in reality a means to weaken physical ownership. >>
If that is what they were trying to do, it backfired obviously. And if they attempt to do it again to get gold down to say, $1000, even more physical inventory will be depleted.
When the paper market goes totally FUBAR, they may resort to extreme measures such as high taxes or flat out confiscation.
But I thought that the lower the price went the greater the demand. You said so yourself?
You are looking for reasons to support a supposition. This invariably leads to incorrect assessment.
Knowledge is the enemy of fear
<< <i>I suspect we are about to see more effort to reduce physical demand.
But I thought that the lower the price went the greater the demand. You said so yourself?
You are looking for reasons to support a supposition. This invariably leads to incorrect assessment. >>
Not looking for anything, found it back in 2005. Just sharing opinion on PMs while some prefer to share opinion on fellow members.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
<< <i>
<< <i>I suspect we are about to see more effort to reduce physical demand.
But I thought that the lower the price went the greater the demand. You said so yourself?
You are looking for reasons to support a supposition. This invariably leads to incorrect assessment. >>
Not looking for anything, found it back in 2005. Just sharing opinion on PMs while some prefer to share opinion on fellow members. >>
It's called Oppositional Defiance, Derry. It doesn't require a topic, only to be a contrarian, regardless. It's become predictable, as it does.
<< <i>I suspect we are about to see more effort to reduce physical demand.
But I thought that the lower the price went the greater the demand. You said so yourself?
You are looking for reasons to support a supposition. This invariably leads to incorrect assessment. >>
I still say the lower the price the greater the demand. However, those manipulating the price lower are doing so based on their academic theory that lower prices will discourage the accumulation of physical. Current shortages tell us who's right and who is wrong. . . at this time. Maybe their theory will prove correct in the longer term. Time will tell.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
You are smarter than I am.
It's called Oppositional Defiance, Derry. It doesn't require a topic, only to be a contrarian, regardless. It's become predictable, as it does.
Derrybs reasoning is akin to a scene where one man lies dead and another is holding a gun. The first supposition would be that the man was murdered which could be far from the truth.
Knowledge is the enemy of fear
Knowledge is the enemy of fear
<< <i>Dont you guys find it fascinating that the supposed increased demand for physical drove down the price? The panic of the Russians to get their hands in gold made the price go lower? And this is a market in which we are to find comfort? >>
While I have no hope of you ever agreeing with my opinion/outlook I do look forward to the day I no longer have to say the same thing two or three times to have it understood:
The increased demand for conversion of paper to physical didn't drive prices down, it drove warehouse/depository inventory down. Those that fear a metal shortage in the warehouses because of this increased demand to convert paper to physical are responsible for the price takedown in hopes of stopping the run on the vaults. We won't know if they succeeded until we see future inventory reports but they did succeed in creating increased demand in the secondary physical market that you and I live in. Rise in premiums and temporary unavailability of fabricated metal tells us this.
The increased demand for physical delivery of paper holdings is not "supposed." Depository inventories say it is real, unless you care to make a photoshop accusation:
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
Amen.
I'm paraphrasing a jpm exec with a recent statement.
"Why should we own it when we can buy it cheaper in the future?"
I can't resist jumping - no, springboarding - into this one.
Yes, normally a lower price stimulates more demand as long as there is demand in the first place. I suppose that I still believe the profs that taught us that many years ago.
You are looking for reasons to support a supposition. This invariably leads to incorrect assessment.
I really don't believe this to be the case, and some of the following dialog will explain the reasons why.
Re: oppositional defiance. Miles, this is one of the very few times I must disagree with you. My fiancee' works in the field. Oppositional defiance is the precursor to anti-social behavior, i.e. criminal behavior and is associated with juveniles who are supposedly not yet crystallized in their behavior patterns but who exhibit the same behaviors as anti-socials.
Contrarian opinion isn't anti-social or oppositional defiant. I don't know about the predictability aspect but my guess is that contrarian is based on reading and learning of history, and reading of "non-mainstream" opinion. And in my experience, the mainstream opinion is mainly the product of propagandizing.
Dont you guys find it fascinating that the supposed increased demand for physical drove down the price?
I don't believe that is what's been reported. My understanding of the situation is that the price was manipulated down first by jawboning and then by HFT program trading via massive sell orders during thin trading, which triggered more stops and resulted in an actual selloff in the paper market which is used as the "price". THEN, demand was stimulated and worldwide buying has been the result.
You might ask yourself, "who would do such a thing, and why?"
The panic of the Russians to get their hands in gold made the price go lower? And this is a market in which we are to find comfort?
Russia is accumulating gold, but what indicates a panic on their part? In their case, I might actually concede anti-social behavior, but that doesn't mean that Russian buying isn't happening. Gold buying on the part of the Russians is only a fraction of worldwide demand, which is substantial at the moment.
Derrybs reasoning is akin to a scene where one man lies dead and another is holding a gun. The first supposition would be that the man was murdered which could be far from the truth.
Regardless of whether derryb's analysis is 100% correct (and it may be), the fact is that the man on the ground is dead, and that fact is irrefutable. If that man owed you a large sum of money and his assets have disappeared without a trace, it makes no difference who took them or whether the other man has a gun or a bazooka.
if derrybs ideas are correct, then it supports my contention that if all the physical were to be taken off the market then prices would drop. Thus is because a market would no longer exist. Why seek to obtain the unattainable?
wtf? No, it wouldn't support that contention. Demand plays a very important part of that equation, no? If you make the assumption you are making, you are not understanding any of the supply-demand market dynamics.
And that would be a mistake. In my opinion.
Come'on cohodk, I expect a more-reasoned counterpoint than that one.
I knew it would happen.
That's probably true with respect to the Comex if they no longer have physical metal to deliver. They would cease to be a determinant of physical metal prices, only paper wishes.
The real physical market would then shift to London or even to Hong Kong and other trading centers. Even if all these trading centers became paper players only there would still
be a physical market out there. Individual people and merchants would determine the price of physical on a daily basis....just as they did for thousands of years before HFT's and
derivatives descended down upon us like a plague. The market is wherever the gold is stored: your sdb, your basement, your pockets, your local coin shop, gold miners, jewelers,
etc. All of these are part of the "market." We've been brainwashed to think that HFT's owned by too big to jail banks and hedge funds are "the market." The market is us...and most
of the gold in the world is already in the people's hands.
jmski, what if the man had killed himself? Yes, it it wouldnt matter whether a gun or bazooka or even the fact that he was dead. The method of death is not in question, but the circumstances are. Just as the circumstances surrounding gold not maintaining value are questioned.
Those that fear a metal shortage in the warehouses because of this increased demand to convert paper to physical are responsible for the price takedown in hopes of stopping the run on the vaults
Gotcha derryb.
Nothing wrong with differing opinion. I just value opinion differently if supported by fact, rather than supposition, as I think you do as well.
For the last 3 years i've been saying that PMs will not always hold value, are not special, will cause investor angst, paranoia, and opportunity cost. And I have been very consistant in that. Unfortunately as the values (purchasing power) of PMs has dropped, the rhetoric of manipulation and conspiracy has increased. This is typical investor behavior in the face of loss that is deemed unjustified or unfathomable. All of this was highly anticipated as I have written.
I agree with many of your points (fundamentals), but also believe those fundamentals could/can prove to be false promises. Yes, gold could hit 5000 and silver 100. But if you purchased at 1800 and 40 and had to wait 15 years, well then, your returns will have been very similar to those of the stock market over the last 100 years. My belief is that all asset classes appreciate at about the same rate over time, just at different interim rates and at different times. Catch the bull when it is a calf and you will think everything is great, but catch it when it stumbled from an arthritic hip, and you may not like the ride you will take.
Knowledge is the enemy of fear
<< <i>Those that fear a metal shortage in the warehouses because of this increased demand to convert paper to physical are responsible for the price takedown in hopes of stopping the run on the vaults >>
<< <i>Gotcha derryb. My opinion is that this is a very far fetched fantasy bantered about by die hard PM bulls. Our opinions only differ in that we view PMs differently. I see them as a just another asset class. You see them as much more important.
Nothing wrong with differing opinion. I just value opinion differently if supported by fact, rather than supposition, as I think you do as well.
For the last 3 years i've been saying that PMs will not always hold value, are not special, will cause investor angst, paranoia, and opportunity cost. And I have been very consistant in that. Unfortunately as the values (purchasing power) of PMs has dropped, the rhetoric of manipulation and conspiracy has increased. This is typical investor behavior in the face of loss that is deemed unjustified or unfathomable. All of this was highly anticipated as I have written. >>
Our opinions are much closer than you think. The big difference appears to be the manipulation issue. I see most markets as being manipulated and see no reason to make PMs the exception. Fact is something in shortage when it comes to manipulation because of the implications to those doing the manipulating. But it is occuring in today's markets, led by FED action. Setting low interest rates and dumping trillions of dollars into the system are nothing short of manipulation - calculated action to obtain a desired market affect.
For the record I'm a die hard PM long term bull. I see the short term volatility as opportunity for those that have the know how to use it to their advantage. When I see the long term promise of metal dwindling I will find it in another asset class. When real estate quickly dwindled, I had already switched to equities and metal. When I saw equities being bubbled by the FED I went all-in with the metal. Given the policy actions against the dollar I'll continue to reside in metals, for now.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
Knowledge is the enemy of fear
<< <i>I prefer to call the term manipulation, "the way it is". But I dont view manipulation as a deliberate attempt to separate me from my money. >>
And I see it as nothing but an attempt to separate someone from their money. A high murder rate may be "the way it is," but that doesn't excuse or justify it and it shouldn't prevent voices from speaking out against it.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
My grocery bill weekly proves the loss of value in the dollar. Coho can 'bear talk' all he wants. When I don't need my salary to barely get ahead we can adjust the conversation.
Re: oppositional defiance. Miles, this is one of the very few times I must disagree with you. My fiancee' works in the field. Oppositional defiance is the precursor to anti-social behavior, i.e. criminal behavior and is associated with juveniles who are supposedly not yet crystallized in their behavior patterns but who exhibit the same behaviors as anti-socials.
Contrarian opinion isn't anti-social or oppositional defiant. I don't know about the predictability aspect but my guess is that contrarian is based on reading and learning of history, and reading of "non-mainstream" opinion. And in my experience, the mainstream opinion is mainly the product of propagandizing.
I understand your point of view, Jimski.
Oppositional Defiance need not be a precursor to anything regarding a mental condition (including the largely misunderstood diagnosis of anti-social disorder or habitual criminal behavior) other than the desire to oppose and defy for the simple internal desire to do so. The pure satisfaction of opposing others regardless of being an adult, geriatric or teen. The desire to provoke or annoy others. Plenty of high-functioning folks are oppositional. Hence, message boards.
Once one bravely states their opinion it takes little commitment or creativity to be a contrarian. Just have a firm grasp on the obvious and the polar view. That is predictable.
I am NEVER--ever-- going to disagree with you.
Liberty: Parent of Science & Industry
<< <i>Sometimes, folks simply disagree with an opinion because they either do not think it is correct (flat out wrong), or it oversimplifies the situation, or it indicates faulty cause-effect reasoning (correlation vs causation), or extrapolates an observation to the point of absurdity, or they think the argument contains other flaws of logic. Other times, they may be contrary to stimulate discussion and cause a refinement of position, or to set up a straw man. Or they may be just pushing buttons, for fun. >>
E) all of the above
Derry, silver and gold otc sales
RR, indepth analysis from the bunker
Jmski, real world experience
Cohodk, 24 hr pot stirrer and charts
Sorry if I left anyone out.